China’s econ­omy slows in Q2

Bei­jing’s grow­ing debt to trig­ger eco­nomic shocks

BEI­JING: China’s econ­omy lost mo­men­tum in the sec­ond quar­ter, a sur­vey shows, as Bei­jing’s ef­forts to curb risky lend­ing and in­vest­ment took a toll on the Asian pow­er­house. The world’s sec­ond-largest econ­omy ex­panded by 6.8 per­cent in the April-June pe­riod, com­pared with a year ago, ac­cord­ing to the me­dian fore­cast of 12 an­a­lysts polled by AFP. That fol­lows a bet­ter-thanex­pected in­crease of 6.9 per­cent in the first three months of the year.

The es­ti­mate comes ahead of the of­fi­cial re­lease to­mor­row of China’s close­ly­watched GDP growth data for the sec­ond quar­ter. Debt-fu­elled in­vest­ment in in­fra­struc­ture and real es­tate has un­der­pinned China’s growth for years but warn­ings of a po­ten­tial fi­nan­cial cri­sis have spurred Bei­jing to clamp down. In the lat­est alert, Fitch Rat­ings on Fri­day said China’s grow­ing debt could trig­ger “eco­nomic and fi­nan­cial shocks” even as it main­tained its A-plus rat­ing on the coun­try. That fol­lows Moody’s de­ci­sion in May to down­grade China for the first time in al­most three decades on con­cerns over its bal­loon­ing credit and slow­ing growth. Tighter re­stric­tions on prop­erty pur­chases and bank lend­ing will con­tinue to weigh on the econ­omy in the months ahead, said Larry Hu, head of China eco­nomics at Mac­quarie Group. “We ex­pect GDP growth to trend down in the sec­ond half of 2017 on slow­ing prop­erty sales and tight liq­uid­ity,” he said.

The econ­omy is likely to face fur­ther head­winds as con­sump­tion also comes un­der pres­sure from slow­ing in­come growth, said Fan Zhang, se­nior China econ­o­mist at RHB Bank. UBS chief China econ­o­mist Tao Wang said “higher fund­ing costs due to su­per­vi­sory tight­en­ing” will im­pact fixed-as­set in­vest­ment-which mea­sures spend­ing on real es­tate, roads and bridges. But a sharp slow­down in the sec­ond half is un­likely as pol­i­cy­mak­ers pre­pare for an im­por­tant Com­mu­nist Party congress later this year that will likely make Pres­i­dent Xi Jin­ping the most pow­er­ful leader in a gen­er­a­tion. “It is there­fore highly prob­a­ble that author­i­ties will use the re­sources and pol­icy tools at their dis­posal to en­sure a pos­i­tive eco­nomic out­come,” Citibank said. The gov­ern­ment has trimmed its 2017 GDP growth tar­get to around 6.5 per­cent, af­ter it ex­panded by 6.7 per­cent in 2016 — its slow­est rate in more than a quar­ter of a cen­tury. De­spite grow­ing con­cerns about China’s fi­nan­cial risks, Pre­mier Li Ke­qiang said last month that the coun­try could reach this year’s eco­nomic growth tar­gets.

Last quar­ter’s growth mo­men­tum had con­tin­ued into the cur­rent one, he said, not­ing that tra­di­tional eco­nomic in­di­ca­tors such as power gen­er­a­tion and con­sump­tion, and new busi­ness or­ders had in­creased “sig­nif­i­cantly”.—AFP

CHEN­NAI: An In­dian boy holds dried fish be­fore tak­ing them to a mar­ket at a fish­ing har­bor in Chen­nai.—AFP

SHANG­HAI: This pic­ture in Shang­hai shows a girl rid­ing bi­cy­cle from a shar­ing com­pany.—AFP